OPEC cuts oil supply steeply

Saudi crude output to fall to 9.8 million bpd in March – Falih

LONDON, Feb 12, (RTRS): OPEC said on Tuesday it had cut oil production steeply under a global supply deal, although it flagged headwinds confronting its efforts to prevent a glut this year including weaker demand and higher rival output.

In a monthly report, OPEC said its oil output fell almost 800,000 barrels per day in January to 30.81 million bpd. That is still slightly more than the expected 2019 demand for OPEC crude, which the producer group lowered to 30.59 million bpd.

Worried by a drop in oil prices and rising supplies, the Organization of the Petroleum Exporting Countries and its allies including Russia agreed in December to return to supply cuts. OPEC is lowering output by 800,000 bpd from Jan 1.

In the report, OPEC cut its forecast for 2019 world economic growth by 0.2 percentage point to 3.3 percent and highlighted a range of headwinds, including a slowdown in global trade.

“Some recent positive developments could support the global economy at its current level, including the recovery in oil prices, possible progress in U.S.-China trade negotiations and less-ambitious monetary tightening by the US Federal Reserve,” OPEC said in the report.

“Nevertheless, this would not lift the global economy beyond the growth forecast.”

With the supply cut delivered in January, OPEC has achieved 86 percent compliance with pledged reductions, according to a Reuters calculation — a high rate by OPEC’s past standards.

Voluntarily

This rate could rise in coming months as top exporter and OPEC kingpin Saudi Arabia voluntarily lowers supply by more than it agreed.

World oil demand will grow more slowly this year, OPEC said, and non-OPEC production will rise more rapidly than expected.

OPEC forecast global oil demand would grow by 1.24 million bpd, down 50,000 bpd from last month and weaker than 1.47 million in 2018.

Saudi Arabia plans to produce around 9.8 million barrels per day of oil in March, over half a million bpd below its pledged production level under a global supply-cutting deal, Energy Minister Khalid al-Falih told the Financial Times.

Exports would fall in March to 6.9 million bpd, according to the article published on Tuesday.

The March production figure means Saudi would be voluntarily cutting output by more than 500,000 bpd below its pledged production level under a deal between the Organization of the Petroleum Exporting Countries and allies led by Russia.

Under the deal reached in December and which came into effect at the start of the year, Saudi Arabia’s target production is 10.311 million bpd.

The news boosted Brent crude prices by more than 2 percent to nearly $63 a barrel.

Production in March would be 1.2 million bpd lower than Saudi Arabia’s November output, which was an all-time high.

In the interview, Falih addressed a US bill that might expose OPEC to antitrust lawsuits, saying the legislation could be “harmful” to the global economy, and expressed his hope that the United States would “do the right thing”.

He said if Saudi Arabia were unable to balance the market by adjusting production, the world would suffer “irreparably”.

A US House of Representatives committee approved the bill known as No Oil Producing and Exporting Cartels Act, or NOPEC, last week.